All of us at Personal Capital hope this finds you safe in this difficult time in history.
Stocks Enter Fastest New Bear Market in History
While stock declines began in February, March may be remembered as the month when the full destructiveness of COVID-19 was first felt. Mass-shutdowns began around the globe and stocks entered the fastest new bear market in history. Global stocks fell over 14% in the month and 21.3% for the quarter. Bonds were roughly flat in March but experienced severe daily volatility.
What Will Happen With the Economy?
We believe stock market direction for the remainder of the year will mostly depend on how long and to what degree people will need to avoid one another. That is the main factor causing job loss and slowing the economy. Shutdowns are in place for good reason, but we believe it will not be feasible to maintain them indefinitely. The longer they last the more economic damage there will be. Countries will find creative approaches to return, but the scope and timing is not yet possible to know. More testing and more data should help paint a clearer picture in April.
It’s clear the global economy will take a massive hit and may require a significant time to recover. Market declines in March reflect this belief. It’s completely unknown if what’s been priced in so far fully reflects reality, is overly fearful, or turns out to be overly optimistic. We believe that people will ultimately overcome this challenge and companies will eventually return to growing earnings.